accounting for governmental and nonprofit entities, 18e (reck) chapter … · 2020-01-08 ·...

1 Copyright © 2019 McGraw-Hill Education. All rights reserved.

No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Accounting for Governmental and Nonprofit Entities, 18e (Reck) Chapter 2 Principles of Accounting and Financial Reporting for State and Local Governments

1) According to the guidance of GASB Concepts Statement 3, financial information can be communicated by recognition in the financial statements, disclosure in the notes to the financial statements, presentation as required supplementary information, or presentation as supplementary information.

2) According to GASB Concepts Statement 1 a primary objective of financial reports is to provide information useful in determining the accountability of the government.

3) Activities a local government can engage in are classified as governmental, business-type, or fiduciary.

4) Governmental funds are identical to governmental activities, proprietary funds are identical to business-type activities, and fiduciary funds are identical to fiduciary activities of a government.

5) Only those governmental and proprietary funds that meet the GASB size criteria for major funds are reported in separate columns of the governmental and proprietary fund financial statements.

6) Economic resources are cash or items expected to be converted into cash during the current period, or soon enough thereafter to pay current period liabilities.

7) Governmental funds account for assets but not the liabilities.

8) The types of funds that may be used in governmental accounting are classified into the three categories of governmental, proprietary, and fiduciary.

9) The governmental funds category includes the General Fund, special revenue funds, debt service funds, capital projects funds, and internal service funds.

10) Governments can, in part, demonstrate operational accountability by reporting proprietary and fiduciary fund financial information, as well as all government-wide financial information, using an economic resources measurement focus and the accrual basis of accounting.

11) All capital assets acquired by or used by a fund should be reported in the fund balance sheet or statement of net position.

12) Because budgetary accounts are used by governments, government financial statements can never be said to be in accord with generally accepted accounting principles.

13) The maximum sets of fund financial statements a government would present are three.

14) When revenues are legally restricted by external resource providers or committed by enabling legislation for particular operating purposes, a private purpose trust fund is created.



15) A debt service fund is used to account for financial resources segregated for the purpose of making principal and interest payments on general long-term debt.

16) A deferred inflow of resources is defined as "an acquisition of net assets by the government that is applicable to a future reporting period."

17) Expenditures are never recorded in governmental funds.

18) Deferred outflow of resources is a type of asset that is unique to government.

19) Revenues is an example of what the GASB terms an inflow of resources.

20) An expenditure is an example of what the GASB terms an outflow of resources.

21) Deferred inflow of resources and deferred outflow of resources would be shown in separate sections of a government's statement of net position.

22) In accordance with GASB standards, a deferred inflow of resources is reported on the financial statements the same as an unearned revenue.

23) The GASB concept statements indicate that an asset that is going to be converted to cash should be reported at a remeasured amount at the financial statement date.

24) Proprietary funds primarily provide services to the general public for a fee.

25) A permanent endowment is an example of a nonspendable fund balance.

26) Assigned fund balances can be either positive or negative.

27) The General Fund is the only fund that can have a positive unassigned fund balance.

28) The positive fund balance in a special revenue fund must at a minimum be reported as assigned.

29) Nonmajor funds are not reported on the fund financial statements.

30) There are four major activity categories reported by state and local governments: governmental, government-wide, proprietary, and fiduciary.

31) Governmental activities include the core services provided by a government, such as public safety.



32) Which of the following is a primary objective of financial reporting by state and local governments? A) To provide information that can be used for capital allocation decisions made by external investors. B) To report on the legal requirements imposed on the government by its elected officials. C) To provide information that can be used to assess a government's accountability. D) To fulfill the government's statutory duty to report on cash received and cash disbursed.

33) According to the GASB definition, which of the following represents an inflow of resources? A) Expenditures. B) Revenues. C) Assets. D) Deferred inflows.

34) According to the GASB, information that is essential and useful to placing information in the correct context should be reported as which of the following? A) Required supplementary information. B) Supplementary information. C) Notes to the financial statements. D) A line item on the financial statements.

35) Which of the following is not one of the methods recommended by the GASB Concepts Statement 3 for communicating information to external users of government financial reports? A) Providing a popular report. B) Recognition in the financial statements. C) Presentation as required supplementary information. D) Disclosure in the notes to the financial statements.

36) Which of the following activities is considered a core government activity? A) Finance and budget. B) Central purchasing. C) Culture and recreation. D) Employee pension fund.

37) Which of the following is true regarding financial reporting for internal service funds? A) Internal service funds are reported in the governmental fund financial statements. B) Internal service funds are aggregated and reported as a major fund in the proprietary fund financial statements. C) Internal service funds are generally reported in the Business-type Activities column of the government-wide financial statements. D) Internal service funds are generally reported in the Governmental Activities column of the government-wide financial statements.



38) Which of the following is not a characteristic of a fund as defined by GASB standards? A) An accounting entity. B) A fiscal entity. C) A reporting entity. D) A self-balancing set of accounts.

39) In accounting for state and local governments the modified accrual basis is required for A) Proprietary and fiduciary funds. B) Governmental funds. C) Governmental and fiduciary funds. D) Governmental and internal service funds.

40) Under the modified accrual basis of accounting, revenues should be recognized when A) Earned. B) Collected in cash. C) Authorized by the budget ordinance. D) Measurable and available.

41) Which of the following funds is a governmental fund-type? A) Private-purpose trust fund. B) Internal service fund. C) Permanent fund. D) Enterprise fund.

42) Financial resources set aside to pay principal and interest on general long-term debt may be accounted for in which of the following fund types? A) Private-purpose trust fund. B) Debt service fund. C) Principal and interest trust fund. D) Internal service fund.

43) Which of the following is a proprietary fund? A) Special revenue fund. B) Investment trust fund. C) Debt service fund. D) Internal service fund.

44) Which of the following is a fiduciary fund? A) Investment trust fund. B) Special revenue fund. C) Debt service fund. D) Enterprise fund.



45) Which of the following funds would be most appropriate when accounting for an activity that provides goods or services to the public for a fee that is intended to make the activity self-supporting? A) Investment trust fund. B) Enterprise fund. C) Internal service fund. D) Special revenue fund.

46) Which of the following funds should be used if resources provided by a federal grant must be segregated and used for counseling of youthful offenders? A) Private-purpose trust fund. B) Enterprise fund. C) Internal service fund. D) Special revenue fund.

47) Which of the following funds would be used to account for an activity that provides centralized purchasing and sales of goods or services to other departments or agencies of the government on a cost-reimbursement basis? A) Enterprise fund. B) Fiduciary fund. C) Internal service fund. D) Permanent fund.

48) Which of the following funds would record depreciation of capital assets? A) Special revenue fund. B) Permanent fund. C) Internal service fund. D) Custodial fund.

49) Capital assets used by departments accounted for by the General Fund of a governmental unit should be accounted for in A) The General Fund. B) The governmental activities journal. C) The business-type activities journal. D) The general capital assets fund.

50) Capital assets used by an enterprise fund should be accounted for in the A) Enterprise fund and depreciation on the capital assets should be recorded. B) Business-type activities journal but no depreciation on the capital assets should be recorded. C) Governmental activities journal and depreciation on the capital assets should be recorded. D) Enterprise fund but no depreciation on the capital assets should be recorded.

51) Which of the following funds are proprietary funds? A) Enterprise funds, investment trust funds, pension trust funds, and the General Fund. B) Enterprise funds and internal service funds. C) Internal service funds, special revenue funds, and enterprise funds. D) Proprietary funds are not used in governmental accounting.



52) Which of the following funds are governmental funds? A) General Fund, special revenue funds, capital projects funds, debt service funds, and private-purpose trust funds. B) General Fund, special revenue funds, private-purpose trust funds. C) General Fund, special revenue funds, debt service funds, capital projects funds, and permanent funds. D) General Fund, special revenue funds, capital projects funds, debt service funds, and internal service funds.

53) The activities of a water utility department, which offers its services to the general public on a user charge basis, should be accounted for in A) An enterprise fund. B) A special revenue fund. C) The General Fund. D) An internal service fund.

54) The measurement focus and basis of accounting that are most unlike those used by business entities are those used by A) Governmental funds. B) Fiduciary funds. C) Proprietary funds. D) Contribution funds.

55) Which of the following governmental funds must be reported as a major fund? A) The General Fund. B) Any fund with total assets, liabilities, revenues, or expenditures that are 10% or more of the General Fund and 5% or more of total General Fund and Business-type Activities. C) The government may opt to include or exclude any fund it choses as a major fund. D) Only the General Fund and special revenue funds that meet the 10% and 5% size criteria.

56) The basis of accounting that should be used in preparing fund financial statements is:

Governmental funds Proprietary funds Fiduciary funds

A) Modified accrual Accrual Modified accrual

B) Modified accrual Modified accrual Modified accrual

C) Modified accrual Accrual Accrual

D) Accrual Accrual Accrual

A) Choice A B) Choice B C) Choice C D) Choice D



57) A major governmental fund is one that has one or more elements (e.g., assets, liabilities, revenues, or expenditures) that is at least: A) Five percent of the corresponding element(s) of total governmental funds and 10 percent of the corresponding element(s) of total governmental and enterprise funds combined. B) Ten percent of the corresponding element(s) of total governmental funds and 10 percent of the corresponding element(s) of total governmental and enterprise funds combined. C) Five percent of the corresponding element(s) of total governmental funds and five percent of the corresponding element(s) of total governmental and enterprise funds combined. D) Ten percent of the corresponding element(s) of total governmental funds and 5 percent of the corresponding element(s) of total governmental and enterprise funds combined.

58) A city received resources that the state indicates can only be used for public works projects, such as road construction. Assuming the resources have not been expended by year end, how would the resources the city received be shown in the city's fund balances? A) Designated Fund Balance. B) Committed Fund Balance. C) Restricted Fund Balance. D) Assigned Fund Balance.

59) Which of the following would be reported as a nonspendable fund balance? A) Inventory. B) Restricted assets. C) Assets whose use is limited. D) Capital assets.

60) Under GASB standards which of the following funds can report a positive amount for unassigned fund balance? A) Capital projects fund. B) Special revenue fund. C) General Fund. D) All of the options.

61) Use the following information to determine whether the Development Special Revenue and the Debt Service Funds should be reported as major funds based on asset amounts provided.

Development Special Revenue Fund Assets $ 740,000Debt Service Fund Assets $ 150,000Total Governmental Fund Assets $ 7,500,000Total Governmental Fund and Enterprise Fund Assets $ 8,750,000A) The Development Special Revenue Fund should be reported as major. B) The Debt Service Fund should be reported as major. C) Both the Development Special Revenue Fund and the Debt Service Fund should be reported as major. D) Neither the Development Special Revenue Fund nor the Debt Service Fund should be reported as major.



62) Which of the following is not one of the seven elements defined by the GASB concept statements? A) Deferred inflow of resources. B) Expenses. C) Assets. D) Net position.

63) The GASB concept statements indicate that in certain instances a remeasured value for an asset or liability should be reported on the financial statements. Which of the following is not one of the methods recommended by the GASB for remeasured amounts? A) Historical cost. B) Lower of cost or market. C) Fair value. D) Replacement cost.

64) The GASB recommends that budget-to-actual comparison information be provided as which of the following? A) A stand-alone financial statement. B) A schedule in the notes to the financial statements. C) As a part of the basic financial statements. D) As a required supplementary information schedule.

65) The GASB requires budget-to-actual comparison information for which of the following? A) The General Fund. B) All governmental funds. C) The General Fund and major special revenue funds with legally adopted budgets. D) All special revenue, debt service and capital projects funds with legally adopted budgets.

66) For each of the following descriptive phrases, indicate the type of fund from the list.

A. Governmental funds B. Proprietary funds C. Fiduciary funds

________ 1. Includes permanent funds held in trust to be used for public purposes ________ 2. Sometimes referred to as self-supporting or business-like funds ________ 3. Any fund held by a government in a custodial or trustee relationship for an external party ________ 4. Used when the government collects taxes or amounts to be invested for external parties ________ 5. Enterprise and internal service funds



67) For each of the following scenarios, indicate how they would be classified for fund balance reporting purposes using the classification list.

A. Nonspendable B. Restricted C. Committed D. Assigned E. Unassigned

________ 1. Bond proceeds of $15,000,000 that must be used for construction of a fire substation remain unspent at the end of the fiscal year. ________ 2. Prepaid rent of $6,000 remains at the end of the fiscal year. ________ 3. The city council adopted a plan to set aside 2% of revenues over the next three years to help build cash reserves. At the end of the fiscal year 2% of the revenues were set aside. ________ 4. The state transportation department provided $1,000,000 in state funds to be used for street widening. At the end of the fiscal year $750,000 remained unspent. ________ 5. The county received a $3,000,000 endowment during the year.

68) Following are some of the county's governmental funds. The county has asked you to determine is any of the funds listed should be classified as major funds based on the GASB size criteria. Clearly indicate which fund(s) you believe should be classified as major and provide support for your choice(s).

General Fund

Special Revenue

Fund

Debt Service Fund

Total of all Governmental

Funds

Total of all Governmental & Enterprise Funds

Assets 12,000,000 1,000,000 500,000 15,000,000 21,000,000

Liabilities 3,000,000 250,000 30,000 4,580,000 5,890,000

Revenues 10,000,000 600,000 1,450,000 13,770,000 17,123,000

Expenditures/ Expenses

9,859,000 725,000 1,300,000 13,460,000 16,665,000

69) List the basic financial statements required by GASB standards and briefly explain their purposes.

70) "The primary purpose of an accounting system for a state or a local government is to make it possible for financial statements to demonstrate compliance with finance-related legal and contractual provisions." Explain why you believe this statement to be correct or incorrect.

71) Explain the difference between measurement focus and basis of accounting. Also, explain the difference between the economic resources measurement focus and the current financial resources measurement focus as well as the difference between the accrual and modified accrual bases of accounting. Which funds and government-wide activities use each focus and each basis?



72) List the seven fund financial statements that are required as part of the basic financial statements by GASB standards. What measurement focus and basis of accounting should be used in preparing each of these statements?

73) Explain the nature of the three major activity categories of a state or local government: governmental activities, business-type activities, and fiduciary activities. Provide examples of each.



Accounting for Governmental and Nonprofit Entities, 18e (Reck) Chapter 2 Principles of Accounting and Financial Reporting for State and Local Governments

1) According to the guidance of GASB Concepts Statement 3, financial information can be communicated by recognition in the financial statements, disclosure in the notes to the financial statements, presentation as required supplementary information, or presentation as supplementary information.

Answer: TRUE Difficulty: 1 Easy Topic: Conceptual Framework-Providing Useful Financial Reports Learning Objective: 02-01 Describe the concepts related to the financial reporting requirements of the GASB reporting model. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

2) According to GASB Concepts Statement 1 a primary objective of financial reports is to provide information useful in determining the accountability of the government.


3) Activities a local government can engage in are classified as governmental, business-type, or fiduciary.

Answer: TRUE Difficulty: 1 Easy Topic: Activities of Government Learning Objective: 02-02 Explain the nature of the three major activity categories of a state or local government: governmental activities, business-type activities, and fiduciary activities. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting



4) Governmental funds are identical to governmental activities, proprietary funds are identical to business-type activities, and fiduciary funds are identical to fiduciary activities of a government.

Answer: FALSE Difficulty: 2 Medium Topic: Financial Reporting Model Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Understand AACSB: Knowledge Application AICPA: FN Reporting

5) Only those governmental and proprietary funds that meet the GASB size criteria for major funds are reported in separate columns of the governmental and proprietary fund financial statements.


6) Economic resources are cash or items expected to be converted into cash during the current period, or soon enough thereafter to pay current period liabilities.

Answer: FALSE Difficulty: 1 Easy Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting



7) Governmental funds account for assets but not the liabilities.

Answer: FALSE Difficulty: 1 Easy Topic: Financial Reporting Model Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

8) The types of funds that may be used in governmental accounting are classified into the three categories of governmental, proprietary, and fiduciary.

Answer: TRUE Difficulty: 1 Easy Topic: Financial Reporting Model Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

9) The governmental funds category includes the General Fund, special revenue funds, debt service funds, capital projects funds, and internal service funds.




10) Governments can, in part, demonstrate operational accountability by reporting proprietary and fiduciary fund financial information, as well as all government-wide financial information, using an economic resources measurement focus and the accrual basis of accounting.

Answer: TRUE Difficulty: 2 Medium Topic: Financial Reporting Model Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Understand AACSB: Knowledge Application AICPA: FN Reporting

11) All capital assets acquired by or used by a fund should be reported in the fund balance sheet or statement of net position.


12) Because budgetary accounts are used by governments, government financial statements can never be said to be in accord with generally accepted accounting principles.

Answer: FALSE Difficulty: 2 Medium Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Understand AACSB: Knowledge Application AICPA: FN Reporting



13) The maximum sets of fund financial statements a government would present are three.

Answer: TRUE Difficulty: 3 Hard Topic: Financial Reporting Model Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

14) When revenues are legally restricted by external resource providers or committed by enabling legislation for particular operating purposes, a private purpose trust fund is created.

Answer: FALSE Difficulty: 2 Medium Topic: Fund Reporting Learning Objective: 02-02 Explain the nature of the three major activity categories of a state or local government: governmental activities, business-type activities, and fiduciary activities.; 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Understand AACSB: Knowledge Application AICPA: FN Reporting

15) A debt service fund is used to account for financial resources segregated for the purpose of making principal and interest payments on general long-term debt.

Answer: TRUE Difficulty: 1 Easy Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting



16) A deferred inflow of resources is defined as "an acquisition of net assets by the government that is applicable to a future reporting period."


17) Expenditures are never recorded in governmental funds.


18) Deferred outflow of resources is a type of asset that is unique to government.

Answer: FALSE Difficulty: 1 Easy Topic: Conceptual Framework-Providing Useful Financial Reports Learning Objective: 02-01 Describe the concepts related to the financial reporting requirements of the GASB reporting model. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

19) Revenues is an example of what the GASB terms an inflow of resources.




20) An expenditure is an example of what the GASB terms an outflow of resources.


21) Deferred inflow of resources and deferred outflow of resources would be shown in separate sections of a government's statement of net position.


22) In accordance with GASB standards, a deferred inflow of resources is reported on the financial statements the same as an unearned revenue.

Answer: FALSE Difficulty: 1 Easy Topic: Conceptual Framework-Providing Useful Financial Reports Learning Objective: 02-01 Describe the concepts related to the financial reporting requirements of the GASB reporting model. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

23) The GASB concept statements indicate that an asset that is going to be converted to cash should be reported at a remeasured amount at the financial statement date.




24) Proprietary funds primarily provide services to the general public for a fee.


25) A permanent endowment is an example of a nonspendable fund balance.

Answer: TRUE Difficulty: 1 Easy Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

26) Assigned fund balances can be either positive or negative.




27) The General Fund is the only fund that can have a positive unassigned fund balance.

Answer: TRUE Difficulty: 2 Medium Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Understand AACSB: Knowledge Application AICPA: FN Reporting

28) The positive fund balance in a special revenue fund must at a minimum be reported as assigned.

Answer: TRUE Difficulty: 2 Medium Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Understand AACSB: Knowledge Application AICPA: FN Reporting

29) Nonmajor funds are not reported on the fund financial statements.

Answer: FALSE Difficulty: 1 Easy Topic: Fund Reporting Learning Objective: 02-04 Discuss the nature of major fund reporting and the criteria used to determine whether a fund should be reported as a major fund. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting



30) There are four major activity categories reported by state and local governments: governmental, government-wide, proprietary, and fiduciary.

Answer: FALSE Difficulty: 1 Easy Topic: Activities of Government Learning Objective: 02-02 Explain the nature of the three major activity categories of a state or local government: governmental activities, business-type activities, and fiduciary activities. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

31) Governmental activities include the core services provided by a government, such as public safety.

Answer: TRUE Difficulty: 1 Easy Topic: Activities of Government Learning Objective: 02-02 Explain the nature of the three major activity categories of a state or local government: governmental activities, business-type activities, and fiduciary activities. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

32) Which of the following is a primary objective of financial reporting by state and local governments? A) To provide information that can be used for capital allocation decisions made by external investors. B) To report on the legal requirements imposed on the government by its elected officials. C) To provide information that can be used to assess a government's accountability. D) To fulfill the government's statutory duty to report on cash received and cash disbursed.

Answer: C Difficulty: 1 Easy Topic: Conceptual Framework-Providing Useful Financial Reports Learning Objective: 02-01 Describe the concepts related to the financial reporting requirements of the GASB reporting model. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting



33) According to the GASB definition, which of the following represents an inflow of resources? A) Expenditures. B) Revenues. C) Assets. D) Deferred inflows.

Answer: B Difficulty: 1 Easy Topic: Conceptual Framework-Providing Useful Financial Reports Learning Objective: 02-01 Describe the concepts related to the financial reporting requirements of the GASB reporting model. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

34) According to the GASB, information that is essential and useful to placing information in the correct context should be reported as which of the following? A) Required supplementary information. B) Supplementary information. C) Notes to the financial statements. D) A line item on the financial statements.

Answer: A Difficulty: 1 Easy Topic: Conceptual Framework-Providing Useful Financial Reports Learning Objective: 02-01 Describe the concepts related to the financial reporting requirements of the GASB reporting model. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

35) Which of the following is not one of the methods recommended by the GASB Concepts Statement 3 for communicating information to external users of government financial reports? A) Providing a popular report. B) Recognition in the financial statements. C) Presentation as required supplementary information. D) Disclosure in the notes to the financial statements.

Answer: A Difficulty: 1 Easy Topic: Conceptual Framework-Providing Useful Financial Reports Learning Objective: 02-01 Describe the concepts related to the financial reporting requirements of the GASB reporting model. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting



36) Which of the following activities is considered a core government activity? A) Finance and budget. B) Central purchasing. C) Culture and recreation. D) Employee pension fund.

Answer: C Difficulty: 1 Easy Topic: Activities of Government Learning Objective: 02-02 Explain the nature of the three major activity categories of a state or local government: governmental activities, business-type activities, and fiduciary activities. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

37) Which of the following is true regarding financial reporting for internal service funds? A) Internal service funds are reported in the governmental fund financial statements. B) Internal service funds are aggregated and reported as a major fund in the proprietary fund financial statements. C) Internal service funds are generally reported in the Business-type Activities column of the government-wide financial statements. D) Internal service funds are generally reported in the Governmental Activities column of the government-wide financial statements.

Answer: D Difficulty: 1 Easy Topic: Financial Reporting Model Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting



38) Which of the following is not a characteristic of a fund as defined by GASB standards? A) An accounting entity. B) A fiscal entity. C) A reporting entity. D) A self-balancing set of accounts.

Answer: C Difficulty: 1 Easy Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

39) In accounting for state and local governments the modified accrual basis is required for A) Proprietary and fiduciary funds. B) Governmental funds. C) Governmental and fiduciary funds. D) Governmental and internal service funds.

Answer: B Difficulty: 1 Easy Topic: Financial Reporting Model Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting



40) Under the modified accrual basis of accounting, revenues should be recognized when A) Earned. B) Collected in cash. C) Authorized by the budget ordinance. D) Measurable and available.

Answer: D Difficulty: 1 Easy Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

41) Which of the following funds is a governmental fund-type? A) Private-purpose trust fund. B) Internal service fund. C) Permanent fund. D) Enterprise fund.




42) Financial resources set aside to pay principal and interest on general long-term debt may be accounted for in which of the following fund types? A) Private-purpose trust fund. B) Debt service fund. C) Principal and interest trust fund. D) Internal service fund.

Answer: B Difficulty: 1 Easy Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

43) Which of the following is a proprietary fund? A) Special revenue fund. B) Investment trust fund. C) Debt service fund. D) Internal service fund.

Answer: D Difficulty: 1 Easy Topic: Financial Reporting Model Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting



44) Which of the following is a fiduciary fund? A) Investment trust fund. B) Special revenue fund. C) Debt service fund. D) Enterprise fund.

Answer: A Difficulty: 1 Easy Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

45) Which of the following funds would be most appropriate when accounting for an activity that provides goods or services to the public for a fee that is intended to make the activity self-supporting? A) Investment trust fund. B) Enterprise fund. C) Internal service fund. D) Special revenue fund.

Answer: B Difficulty: 2 Medium Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Understand AACSB: Knowledge Application AICPA: FN Reporting



46) Which of the following funds should be used if resources provided by a federal grant must be segregated and used for counseling of youthful offenders? A) Private-purpose trust fund. B) Enterprise fund. C) Internal service fund. D) Special revenue fund.

Answer: D Difficulty: 2 Medium Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Understand AACSB: Knowledge Application AICPA: FN Reporting

47) Which of the following funds would be used to account for an activity that provides centralized purchasing and sales of goods or services to other departments or agencies of the government on a cost-reimbursement basis? A) Enterprise fund. B) Fiduciary fund. C) Internal service fund. D) Permanent fund.

Answer: C Difficulty: 2 Medium Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Understand AACSB: Knowledge Application AICPA: FN Reporting



48) Which of the following funds would record depreciation of capital assets? A) Special revenue fund. B) Permanent fund. C) Internal service fund. D) Custodial fund.


49) Capital assets used by departments accounted for by the General Fund of a governmental unit should be accounted for in A) The General Fund. B) The governmental activities journal. C) The business-type activities journal. D) The general capital assets fund.




50) Capital assets used by an enterprise fund should be accounted for in the A) Enterprise fund and depreciation on the capital assets should be recorded. B) Business-type activities journal but no depreciation on the capital assets should be recorded. C) Governmental activities journal and depreciation on the capital assets should be recorded. D) Enterprise fund but no depreciation on the capital assets should be recorded.

Answer: A Difficulty: 1 Easy Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

51) Which of the following funds are proprietary funds? A) Enterprise funds, investment trust funds, pension trust funds, and the General Fund. B) Enterprise funds and internal service funds. C) Internal service funds, special revenue funds, and enterprise funds. D) Proprietary funds are not used in governmental accounting.




52) Which of the following funds are governmental funds? A) General Fund, special revenue funds, capital projects funds, debt service funds, and private-purpose trust funds. B) General Fund, special revenue funds, private-purpose trust funds. C) General Fund, special revenue funds, debt service funds, capital projects funds, and permanent funds. D) General Fund, special revenue funds, capital projects funds, debt service funds, and internal service funds.


53) The activities of a water utility department, which offers its services to the general public on a user charge basis, should be accounted for in A) An enterprise fund. B) A special revenue fund. C) The General Fund. D) An internal service fund.

Answer: A Difficulty: 2 Medium Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Understand AACSB: Knowledge Application AICPA: FN Reporting



54) The measurement focus and basis of accounting that are most unlike those used by business entities are those used by A) Governmental funds. B) Fiduciary funds. C) Proprietary funds. D) Contribution funds.

Answer: A Difficulty: 2 Medium Topic: Financial Reporting Model Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Understand AACSB: Knowledge Application AICPA: FN Reporting

55) Which of the following governmental funds must be reported as a major fund? A) The General Fund. B) Any fund with total assets, liabilities, revenues, or expenditures that are 10% or more of the General Fund and 5% or more of total General Fund and Business-type Activities. C) The government may opt to include or exclude any fund it choses as a major fund. D) Only the General Fund and special revenue funds that meet the 10% and 5% size criteria.

Answer: A Difficulty: 1 Easy Topic: Fund Reporting Learning Objective: 02-04 Discuss the nature of major fund reporting and the criteria used to determine whether a fund should be reported as a major fund. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting



56) The basis of accounting that should be used in preparing fund financial statements is:

Governmental funds Proprietary funds Fiduciary funds

A) Modified accrual Accrual Modified accrual

B) Modified accrual Modified accrual Modified accrual

C) Modified accrual Accrual Accrual

D) Accrual Accrual Accrual

A) Choice A B) Choice B C) Choice C D) Choice D

Answer: C Difficulty: 1 Easy Topic: Financial Reporting Model Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

57) A major governmental fund is one that has one or more elements (e.g., assets, liabilities, revenues, or expenditures) that is at least: A) Five percent of the corresponding element(s) of total governmental funds and 10 percent of the corresponding element(s) of total governmental and enterprise funds combined. B) Ten percent of the corresponding element(s) of total governmental funds and 10 percent of the corresponding element(s) of total governmental and enterprise funds combined. C) Five percent of the corresponding element(s) of total governmental funds and five percent of the corresponding element(s) of total governmental and enterprise funds combined. D) Ten percent of the corresponding element(s) of total governmental funds and 5 percent of the corresponding element(s) of total governmental and enterprise funds combined.

Answer: D Difficulty: 1 Easy Topic: Fund Reporting Learning Objective: 02-04 Discuss the nature of major fund reporting and the criteria used to determine whether a fund should be reported as a major fund. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting



58) A city received resources that the state indicates can only be used for public works projects, such as road construction. Assuming the resources have not been expended by year end, how would the resources the city received be shown in the city's fund balances? A) Designated Fund Balance. B) Committed Fund Balance. C) Restricted Fund Balance. D) Assigned Fund Balance.


59) Which of the following would be reported as a nonspendable fund balance? A) Inventory. B) Restricted assets. C) Assets whose use is limited. D) Capital assets.

Answer: A Difficulty: 2 Medium Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Understand AACSB: Knowledge Application AICPA: FN Reporting



60) Under GASB standards which of the following funds can report a positive amount for unassigned fund balance? A) Capital projects fund. B) Special revenue fund. C) General Fund. D) All of the options.


61) Use the following information to determine whether the Development Special Revenue and the Debt Service Funds should be reported as major funds based on asset amounts provided.

Development Special Revenue Fund Assets $ 740,000Debt Service Fund Assets $ 150,000Total Governmental Fund Assets $ 7,500,000Total Governmental Fund and Enterprise Fund Assets $ 8,750,000

A) The Development Special Revenue Fund should be reported as major. B) The Debt Service Fund should be reported as major. C) Both the Development Special Revenue Fund and the Debt Service Fund should be reported as major. D) Neither the Development Special Revenue Fund nor the Debt Service Fund should be reported as major.

Answer: D Difficulty: 3 Hard Topic: Fund Reporting Learning Objective: 02-04 Discuss the nature of major fund reporting and the criteria used to determine whether a fund should be reported as a major fund. Bloom's: Apply AACSB: Knowledge Application AICPA: FN Measurement



62) Which of the following is not one of the seven elements defined by the GASB concept statements? A) Deferred inflow of resources. B) Expenses. C) Assets. D) Net position.


63) The GASB concept statements indicate that in certain instances a remeasured value for an asset or liability should be reported on the financial statements. Which of the following is not one of the methods recommended by the GASB for remeasured amounts? A) Historical cost. B) Lower of cost or market. C) Fair value. D) Replacement cost.




64) The GASB recommends that budget-to-actual comparison information be provided as which of the following? A) A stand-alone financial statement. B) A schedule in the notes to the financial statements. C) As a part of the basic financial statements. D) As a required supplementary information schedule.

Answer: D Difficulty: 1 Easy Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting

65) The GASB requires budget-to-actual comparison information for which of the following? A) The General Fund. B) All governmental funds. C) The General Fund and major special revenue funds with legally adopted budgets. D) All special revenue, debt service and capital projects funds with legally adopted budgets.




66) For each of the following descriptive phrases, indicate the type of fund from the list.

A. Governmental funds B. Proprietary funds C. Fiduciary funds

________ 1. Includes permanent funds held in trust to be used for public purposes ________ 2. Sometimes referred to as self-supporting or business-like funds ________ 3. Any fund held by a government in a custodial or trustee relationship for an external party ________ 4. Used when the government collects taxes or amounts to be invested for external parties ________ 5. Enterprise and internal service funds

Answer: 1. A, 2. B, 3. C, 4. C, 5. B

Explanation: No further explanation details are available for this problem. Difficulty: 1 Easy Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Knowledge Application AICPA: FN Reporting



67) For each of the following scenarios, indicate how they would be classified for fund balance reporting purposes using the classification list.

A. Nonspendable B. Restricted C. Committed D. Assigned E. Unassigned

________ 1. Bond proceeds of $15,000,000 that must be used for construction of a fire substation remain unspent at the end of the fiscal year. ________ 2. Prepaid rent of $6,000 remains at the end of the fiscal year. ________ 3. The city council adopted a plan to set aside 2% of revenues over the next three years to help build cash reserves. At the end of the fiscal year 2% of the revenues were set aside. ________ 4. The state transportation department provided $1,000,000 in state funds to be used for street widening. At the end of the fiscal year $750,000 remained unspent. ________ 5. The county received a $3,000,000 endowment during the year.

Answer: 1. B, 2. A, 3. D, 4. B, 5. A Explanation: No further explanation details are available for this problem. Difficulty: 3 Hard Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Apply AACSB: Knowledge Application AICPA: FN Reporting



68) Following are some of the county's governmental funds. The county has asked you to determine is any of the funds listed should be classified as major funds based on the GASB size criteria. Clearly indicate which fund(s) you believe should be classified as major and provide support for your choice(s).

General Fund

Special Revenue

Fund

Debt Service Fund

Total of all Governmental

Funds

Total of all Governmental & Enterprise Funds

Assets 12,000,000 1,000,000 500,000 15,000,000 21,000,000

Liabilities 3,000,000 250,000 30,000 4,580,000 5,890,000

Revenues 10,000,000 600,000 1,450,000 13,770,000 17,123,000

Expenditures/Expenses

9,859,000 725,000 1,300,000 13,460,000 16,665,000

Answer: Debt Service Fund – The size criteria states that a fund must be at least 10% of the total of all governmental funds for at least one of the elements (assets, liabilities, revenues, expenditures/expenses), and it must be at least 5% of the total of all governmental funds and enterprise funds for the same element. The debt service fund meets the size criteria for revenues since 10% of the total of all governmental funds is $1,377,000 and 5% of the total of all governmental and enterprise funds is $856,150, both of which the debt service fund exceeds. (The thresholds for the other three elements are: assets—10% is $1,500,000, 5% is $1,050,000; liabilities—10% is $458,000, 5% is $294,500; expenditures/expenses—10% is $1,346,000, 5% is $833,250.)

General Fund – the General Fund is always classified as a major fund and it meets the size criteria for all of the elements. Difficulty: 3 Hard Topic: Fund Reporting Learning Objective: 02-04 Discuss the nature of major fund reporting and the criteria used to determine whether a fund should be reported as a major fund. Bloom's: Apply AACSB: Knowledge Application AICPA: FN Measurement



69) List the basic financial statements required by GASB standards and briefly explain their purposes.

Answer: The basic financial statements include two government-wide financial statements, seven fund financial statements, and notes thereto. The government-wide statements are a statement of net position and statement of activities designed to report on the operational accountability of the government as a whole. The fund financial statements that follow are designed to report on the government's fiscal accountability for spending according to legal budgets, laws, and agreements with resource providers. A balance sheet and statement of revenues, expenditures, and changes in fund balance are required for governmental-type funds, as well as a reconciliation of the change in fund balances to change in net position at the government-wide level. A statement of net position; a statement of revenues, expenses, and changes in fund net position; and statement of cash flows are required for proprietary-type funds. A statement of net position and statement of changes in net position are required for fiduciary funds. Difficulty: 1 Easy Topic: Financial Reporting Model Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Communication AICPA: FN Reporting

70) "The primary purpose of an accounting system for a state or a local government is to make it possible for financial statements to demonstrate compliance with finance-related legal and contractual provisions." Explain why you believe this statement to be correct or incorrect.

Answer: The statement is not correct. The GASB specifies that a governmental accounting system must make it possible both to prepare statements in conformity with GAAP and to prepare legal compliance reports. The former are the basic financial statements on which auditors express an opinion; the latter are special purpose reports that may or may not be accompanied by auditors' reports. Difficulty: 2 Medium Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Understand AACSB: Communication AICPA: FN Reporting



71) Explain the difference between measurement focus and basis of accounting. Also, explain the difference between the economic resources measurement focus and the current financial resources measurement focus as well as the difference between the accrual and modified accrual bases of accounting. Which funds and government-wide activities use each focus and each basis?

Answer: Measurement focus describes what is measured; that is, the nature of the resources, claims against resources, and flows of resources that are measured and reported by a fund or activity. The basis of accounting describes when things are measured. The economic resources measurement focus reports on the balances and flows of both current and noncurrent assets and liabilities, whereas the current financial resources focus reports only on the balances and flows of current assets and liabilities. The accrual basis of accounting recognizes revenues when earned and expenses when incurred, where the modified accrual basis recognizes revenues when measurable and available for current spending and expenditures when a current liability has been incurred. Governmental funds use the current financial resources measurement focus, and proprietary and fiduciary funds use the economic resources measurement focus. Governmental funds use the modified accrual basis of accounting. Proprietary and fiduciary funds use the accrual basis of accounting. Governmental and business-type activities at the government-wide level report on net position and activities using the economic resources measurement focus and the accrual basis of accounting. Difficulty: 2 Medium Topic: Fund Reporting Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Understand AACSB: Communication AICPA: FN Reporting



72) List the seven fund financial statements that are required as part of the basic financial statements by GASB standards. What measurement focus and basis of accounting should be used in preparing each of these statements?

Answer: These seven fund statements are required in the basic financial statements (assuming that an entity has funds in each of the three fund types):

Balance sheet—governmental funds Statement of revenue, expenditures, and changes in fund balances—governmental funds Statement of net position—proprietary funds Statement of revenues, expenses, and changes in fund net position—proprietary funds Statement of cash flows—proprietary funds Statement of fiduciary net position Statement of changes in fiduciary net position

In addition, a reconciliation of (1) the total fund balance of governmental funds from the balance sheet—governmental funds to the governmental activities net position from the government-wide statement of net position, and (2) the change in total fund balances of governmental funds from the statement of revenue, expenditures, and changes in fund balances—governmental funds to the change in governmental activities net position from the government-wide statement of activities, are required on the face of the financial statements or as separate schedules.

The governmental funds are accounted for using the current financial resources measurement focus and modified accrual basis of accounting. The proprietary and fiduciary funds are accounted for using the economic resources measurement focus and accrual basis of accounting (except for certain liabilities of defined benefit pension plans and related postemployment healthcare plans). Difficulty: 1 Easy Topic: Financial Reporting Model Learning Objective: 02-03 Explain the Governmental Accounting Standards Board's (GASB) integrated accounting and financial reporting model, including: Government-wide financial statements; Fund financial statements; Definition of fund and principles of fund accounting; Types of funds in each fund category and characteristics of each fund type. Bloom's: Remember AACSB: Communication AICPA: FN Reporting



73) Explain the nature of the three major activity categories of a state or local government: governmental activities, business-type activities, and fiduciary activities. Provide examples of each.

Answer: Governmental activities are those core governmental services, together with general administrative support. Examples include public safety, public works (e.g., road and bridge maintenance), parks and recreation, cultural, and social services. Business-type activities are those that are self-supporting through user charges for services they provide, although operating subsidies from general tax revenues are not uncommon. Typical examples include public utilities, such as water and sewer, transportation systems, golf courses, and swimming pools. Fiduciary activities are those in which the government acts in a fiduciary capacity, either as an agent or trustee, for parties outside the government. Examples include trust funds that benefit individuals and organizations outside of the government. Difficulty: 2 Medium Topic: Activities of Government Learning Objective: 02-02 Explain the nature of the three major activity categories of a state or local government: governmental activities, business-type activities, and fiduciary activities. Bloom's: Understand AACSB: Communication AICPA: FN Reporting

accounting for governmental and nonprofit entities, 18e (reck) chapter … · 2020-01-08 ·...

Documents